The disgraced pharmaceutical executive and hedge fund manager Martin Shkreli must forfeit $7.36 million in assets (PDF) to the federal government following his fraud conviction, a judge ruled Monday. The assets up for forfeiture (PDF) include the single copy of the Wu-Tang album Once Upon A Time in Shaolin that Shkreli reportedly bought for $2 million, as well as a painting by Pablo Picasso.

Further Reading

The forfeiture follows Shkreli’s conviction last October on three of eight counts of securities and wire fraud. The federal government had indicted Shkreli in December of 2015 for running a Ponzi-like scheme, alleging he defrauded investors in two hedge funds he managed and siphoned millions from his pharmaceutical company, Retrophin, to cover losses.

But, despite the high-profile trial, Shkreli is best known for raising the price of a drug for parasitic infections by more than 5,000 percent—from $13.50 a pill to $750 a pill—while he was the CEO of Turing Pharmaceutical. The drug is often prescribed to babies and people with HIV/AIDS.

Further Reading

Following the fraud conviction, the federal government argued that Shkreli should hand over the $7.36 million in assets because the law states that the court can order forfeiture of any property “which constitutes or is derived from proceeds” of securities fraud. But Shkreli and his lawyer argued that he shouldn’t be forced to forfeit the assets—or, at most, give up $504,414—because he didn’t make any profit on the scheme. Also, money went back into the stock market and defrauded investors made their money back in the end.

Further Reading

US District Judge Kiyo Matsumoto rejected the legal argument in an order Monday. She noted that Shkreli provided “only bare citations... and minimal analysis” as support for his case.

The forfeiture includes: $5 million in cash that is currently held in an E*Trade brokerage; all interests in Vyera Pharmaceuticals (formerly known as Turing Pharmaceuticals); the album Once Upon A Time in Shaolin by the Wu Tang Clan; the album Tha Carter V by Lil Wayne; and his Picasso painting.

Further Reading

Shkreli is still awaiting sentencing for his conviction, which is scheduled for March 9. He faces up to 20 years in prison. In a previous ruling, Judge Matsumoto ruled that Shkreli’s crimes resulted in nearly $10.5 million in losses, which could mean a sentence on the harsher side. Shkreli and his lawyer have argued that a 12- to 18-month sentence is appropriate.

Shkreli, who was initially out on a $5 million bail after his indictment, is currently being held in jail following online antics goading followers to pluck a strand of Hillary Clinton’s hair. Though Shkreli painted it as an “awkward attempt at humor or satire,” Judge Matsumoto called the move a “solicitation of assault” and ordered him behind bars to await his sentencing.

But Shkreli and his lawyer argued that he shouldn’t be forced to forfeit the assets—or, at most, give up $504,414—because he didn’t make any profit on the scheme. Also, money went back into the stock market and defrauded investors made their money back in the end.

Shkreli aside, as long as he can pay the amount to be forfeited, why should he have to give up specific items? It seems like a breach of power that a judge can order you to give up any possessions of their choosing in addition to paying the fee.

Items acquired from the proceeds of a crime are forfeit, otherwise the criminal still benefits from the crime.

Shkreli aside, as long as he can pay the amount to be forfeited, why should he have to give up specific items? It seems like a breach of power that a judge can order you to give up any possessions of their choosing in addition to paying the fee.

Well they're going to go with the biggest ticket items first and fill in the remainder with smaller value items.

Do you think he's petty enough to have ripped the album to FLAC so he can release it on the Internet right before the auction and wreck the value?

I dunno - does having a million prints of classic paintings wreck the value of the original painting? There's only one original painting, and I suppose there's only one original CD of Shaolin, and that original seems like it might still have collector value?

Do you think he's petty enough to have ripped the album to FLAC so he can release it on the Internet right before the auction and wreck the value?

I dunno - does having a million prints of classic paintings wreck the value of the original painting? There's only one original painting, and I suppose there's only one original CD of Shaolin, and that original seems like it might still have collector value?

Shkreli aside, as long as he can pay the amount to be forfeited, why should he have to give up specific items? It seems like a breach of power that a judge can order you to give up any possessions of their choosing in addition to paying the fee.

Even, assuming for a second, we want to consider this, how are you going to value those items?

If we assume he attained them with proceeds from a crime, then their entire current value is also a criminal proceed. You can't go by what was paid for them, if they've since increased in value, and remember these aren't simply commodity items. You would have to go with current market value. Which is already incredibly difficult to determine for sure: appraisals help, but it isn't uncommon for artwork and similar unique items to sell at auction for above appraised value. But what if they continue to increase in value, beyond the current market value? Then he is still being unjustly enriched as a benefit of his crime.

In cases like criminal fraud where the issue isn't just about making someone whole (like it is when considering real damages in tort cases), the idea is that even if you take the proceeds from a crime and convert them into something else, that something else is still proceeds from a crime and is forfeit, because any other approach still too easily results in something where you can leverage a crime to continue to profit, even after a judgement against you occurs and you "paid what it's now worth."

Do you think he's petty enough to have ripped the album to FLAC so he can release it on the Internet right before the auction and wreck the value?

Given that Wu-Tang's stipulations were that the owner could only hold private listening parties AND/OR make free copies until 2103, making FLAC copies would be entirely in line with the mission statement.

I'm not a huge fan of Wu-Tang, but I can respect what they were trying to create.

That makes sense. If a bank robber steals $1MIllion and buys a home, of course. But if (for example) a billionaire steals $1million and buys a home, which of his homes do you decide is the one bought with stolen money? It seems the billionare could have bought the home with legit money, and the stolen money just sat in his bank accounts. How can you really say either way?

This is the basics of money laundering. That's why banks always ask about source of funds if it's over a certain amount, there is also automatic reporting to the IRS if over a certain amount. That's why people create sophisticated off-shore shell corporations to purchase property ect... to obscure the true owner and origin of funds. Globally, there is $20 trillion offshore.

Do you think he's petty enough to have ripped the album to FLAC so he can release it on the Internet right before the auction and wreck the value?

Given that Wu-Tang's stipulations were that the owner could only hold private listening parties AND/OR make free copies until 2103, making FLAC copies would be entirely in line with the mission statement.

I'm not a huge fan of Wu-Tang, but I can respect what they were trying to create.

If that is the legal stipulation, I fail to see how the album has any material value today.

Shkreli aside, as long as he can pay the amount to be forfeited, why should he have to give up specific items? It seems like a breach of power that a judge can order you to give up any possessions of their choosing in addition to paying the fee.

Items acquired from the proceeds of a crime are forfeit, otherwise the criminal still benefits from the crime.

That makes sense. If a bank robber steals $1MIllion and buys a home, of course. But if (for example) a billionaire steals $1million and buys a home, which of his homes do you decide is the one bought with stolen money? It seems the billionare could have bought the home with legit money, and the stolen money just sat in his bank accounts. How can you really say either way?

It seems in this scenario the judge gets to just pick a million dollar worth of things of his choosing. I'm not sure I fully support that.

That's why judges have discrection. So they can look at the facts and determine, "This is likely purchased with the proceeds of a crime, therefore it is forfeit. These are not purchased from the proceeds of the crime, therefore they remain in the hands of the accused."

This is the sort of thing where there is no cut and dry answer, so we trust those empowered as judges to make the decision. And if the accused feels the decision was incorrect as a matter of law, they can appeal.

There is no computer program or legal framework that can determine without a doubt what was purchased with the money resulting from a crime. Human decisions have to factor into it.

Shkreli aside, as long as he can pay the amount to be forfeited, why should he have to give up specific items? It seems like a breach of power that a judge can order you to give up any possessions of their choosing in addition to paying the fee.

Items acquired from the proceeds of a crime are forfeit, otherwise the criminal still benefits from the crime.

That makes sense. If a bank robber steals $1MIllion and buys a home, of course. But if (for example) a billionaire steals $1million and buys a home, which of his homes do you decide is the one bought with stolen money? It seems the billionare could have bought the home with legit money, and the stolen money just sat in his bank accounts. How can you really say either way?

It seems in this scenario the judge gets to just pick a million dollar worth of things of his choosing. I'm not sure I fully support that.

No that isn't the case. He doesn't have enough money to pay investors in full. The losses are in excess of $10M. The judge is forfeiting all his assets worth $7M.

If Schkreli HAD $10M+ cash he could simply use that and keep any other assets he owns but he doesn't have it.

So what in your opinion should the judge have done? Let him keep $7M in assets and walk away with proceeds from a crime?

Do you think he's petty enough to have ripped the album to FLAC so he can release it on the Internet right before the auction and wreck the value?

Given that Wu-Tang's stipulations were that the owner could only hold private listening parties AND/OR make free copies until 2103, making FLAC copies would be entirely in line with the mission statement.

I'm not a huge fan of Wu-Tang, but I can respect what they were trying to create.

If that is the legal stipulation, I fail to see how the album has any material value today.

It seems that would preclude anyone from auctioning it off, right?

Why would it preclude the album from being auctioned off?

First sale doctrine still applies.

The only thing the terms prohibit would be things like printing 10 million CDs and selling them for $20 each or holding paid for listening concerts, etc. Nothing prevents the CD from being sold it just can't be distributed for a profit.